House Passes Jobs 3.0 Bill

July 24, 2018

In a near unanimous vote of 406-4, the House passed the bipartisan JOBS and Investor Confidence Act of 2018. The House legislation was passed as House Amendment to S. 488 (previously known as the Encouraging Employee Ownership Act), under suspension of the rules.

The bill – which is comprised of 32 individual pieces of legislation that have passed the Financial Services Committee or the House this Congress with broad bipartisan support – was the third and largest installment of “Jumpstart Our Business Startups (JOBS) Act” legislation aimed at helping small businesses, entrepreneurs and investors by reforming our capital markets.

The critical legislation includes provisions to: ease regulations on “angel investors” and expand the definition of “accredited investors” to make it easier for startup companies and small businesses to attract investments needed to grow and create jobs; make it easier for companies to go public by extending on-ramp exemptions for emerging growth companies (EGCs) to give them more time to financially sustain costs and requirements associated with full compliance; ease securities regulations on Initial Public Offerings (IPOs) to increase opportunities for everyday investors; and cut red tape on asset managers so that Main Street investors don’t have to shoulder the costs of burdensome, unnecessary regulations.

Some of the highlights of the legislation, include:

HALOS (H.R. 79) – This measures defines an angel investor for purposes of the federal securities laws and clarifies the definition of general solicitation contained in the Securities Act to ensure that startups have the opportunity to discuss their products and business plans at certain events, known as “demo days” where there is no specific investment offering.

Fair Investment Opportunities for Professional Experts Act (H.R. 1585) — It modernizes the definition of accredited investor so those who do not have a high income or high net worth but do have the education and job experience to evaluate investment risks and merits can participate in the growth of promising companies.

Small Business Mergers, Acquisitions, Sales & Brokerage Simplification Act of 2017 (H.R. 477) — The bill alleviates costs to small-business owners by simplifying the securities registration system for mergers and acquisition brokers who help transfer the ownership of small, privately held companies. It also disqualifies “bad actors” from utilizing the simplified process and does not allow transactions involving shell companies.

Investing in Main Street (H.R. 2364) – The bill increases the amount of capital and surplus that a financial institution and federal savings association can invest in a Small Business Investment Company from 5 percent to 15 percent.

Family Office Technical Correction Act (H.R. 3972)— The bill clarifies that family offices and family clients, as defined in section 275.202(a)(11)(G)-1 of title 17, Code of Federal Regulations, are accredited investors under Regulation D of the Securities and Exchange Commission.

Investment Adviser Regulatory Flexibility Improvement Act (H.R. 6321) — The legislation directs the SEC to consider alternative methods for businesses or organizations to qualify as a “small business” or “small organization” for the purposes of assessing the regulatory impact on investment advisors.

Senate Majority Leader Mitch McConnell (R-Ky.) is reportedly committed to bringing the bill up for a vote in the Senate, but no timetable has been set.

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National Small Business Association

National Small Business Association